Here’s what RBC Capital Markets analyst Mark Sue had to say today about Cisco’s decision to acquire Pure Digital Technologies:
“It’s not the best way to spend $590M, in our view, but then again Cisco has $29.5B in cash and needs to strengthen its relevance in the consumer device market.”
Pure Digital sells low-end Flip portable video cameras in the $100 to $200 range. But it’s a pretty crowded space, and in a sagging economy, rivals are racing ever further to the low end of the market, not to mention the ubiquity of handheld devices with video functionality.
“Cisco desperately wants to have a tangible product for the consumers pocket, and our view is that the company will eventually replace the Flip brand with its own,” Sue wrote. “Longer term, video (particularly low end video) may become a feature in converged devices, meaning Cisco will need to make more acquisitions and then turn its focus on integration. Of course, there will be a subset of the market which will still want cheap, easy to use, colorful products, and having the Cisco logo everywhere might not be a bad thing. Over 2M Flip units have been sold — not bad but pales in comparison to almost 18M iPhones and 50M Rimm devices.”